The ECJ issued the preliminary ruling in the case C-565/24 ( P-GmbH & Co. KG) .
Context:
Summary
The ECJ case C-565/24 involves P-GmbH & Co. KG, which organized “Kaffeefahrten” excursions from 1997 to 1999 to promote its products. The issue is how to apply VAT rules to these excursions, particularly under the EU’s Sixth Directive on VAT (Directive 77/388/EEC).
Key Points:
- Nature of Excursions: The excursions involved picking up participants, transporting them to tourist sites, and conducting sales activities. The taxpayer used bus companies to provide transportation, with costs exceeding the fares collected.
- Special VAT Scheme: The case questions whether these excursions should be treated under the special VAT scheme for travel agencies, which affects VAT calculation, especially when dealing with a negative margin (i.e., costs exceeding revenues).
- Negative Margin: The taxpayer seeks clarity on whether a negative margin should result in a VAT refund or adjustment, as the current scheme doesn’t explicitly address this scenario.
- Legal Questions: The ECJ is asked to interpret the application of the VAT directives, especially concerning whether the excursions qualify as travel agency services and how to handle negative margins in VAT calculations.
The case highlights complexities in VAT treatment for promotional activities and seeks guidance from the ECJ on applying EU VAT rules.
Articles in the EU VAT Directive
Article 306 in the EU VAT Directive 2006/112/EC.
Special scheme for travel agents
Article 306
1. Member States shall apply a special VAT scheme, in accordance with this Chapter, to transactions carried out by travel agents who deal with customers in their own name and use supplies of goods or services provided by other taxable persons, in the provision of travel facilities.
This special scheme shall not apply to travel agents where they act solely as intermediaries and to whom point (c) of the first paragraph of Article 79 applies for the purposes of calculating the taxable amount.
2. For the purposes of this Chapter, tour operators shall be regarded as travel agents.
Facts
The discussion between the tax authorities and the taxpayer involves the treatment of VAT on excursions organized by the taxpayer, P-GmbH & Co. KG, from 1997 to 1999. These excursions, known as “Kaffeefahrten,” were promotional trips aimed at selling goods to participants. The taxpayer collected fares from participants, but the bus costs exceeded these fares, resulting in a negative margin.
Key points of contention include:
- VAT Treatment of Excursions: The taxpayer argues for a full VAT deduction on bus costs, claiming these costs are directly related to the taxable excursions. The tax authorities, however, have denied the full deduction, treating the bus services as part of a broader promotional activity not entirely subject to VAT deduction.
- Application of Special Scheme for Travel Agencies: The case questions whether these excursions fall under the special VAT scheme for travel agencies, which could affect how the VAT is calculated, especially given the negative margin.
- Negative Margin Implications: The authorities and the taxpayer debate whether a negative margin should lead to a VAT refund or adjustment, as under normal VAT rules, a positive margin is typically expected.
The case has been referred to the ECJ to clarify how EU VAT directives apply in this context, particularly concerning the special travel agency scheme and the handling of negative margins.
Questions
- Does an “excursion organized by a trader outside their business premises” as per Article 1(1) of Directive 85/577/EEC qualify as “services provided by a travel agency in the course of a journey” under Article 26(2) of Directive 77/388/EEC?
- If the first question is affirmed: Should the special scheme for travel agencies under Article 26 of Directive 77/388/EEC be applied even when the margin, which serves as the taxable base under Article 26(2)(3) of the Directive, is negative because the actual costs exceed the “total amount without VAT” paid by the traveler?
- If both the first and second questions are affirmed: Is Article 12(1) of Directive 77/388/EEC applicable to the margin considered as the taxable base under Article 26(2)(3) of the Directive, even if the margin is negative, resulting in a refund to the taxpayer?
Similar ECJ Cases
- Travel Vac Case (C-423/97): This case involved criteria for defining excursions organized outside business premises, relevant for interpreting the directives in question.
- IST Case (C-200/04): This case discussed the application of the special VAT scheme for travel agencies, particularly regarding linguistic trips, which are analogous in terms of determining the scope of the VAT scheme.
- Madgett and Baldwin Case (C-308/96 and C-94/97): These cases examined whether activities not traditionally considered travel agency services could fall under the special VAT scheme.
- Skarpa Travel Case (C-422/17): This case provided insights into how the VAT scheme for travel agencies is not an independent tax system but integrates with the general VAT rules, except for specific deviations.
- Minerva Kulturreisen Case (C-31/10): This case emphasized that the special VAT scheme should only apply as far as necessary to achieve the directive’s objectives.
- Commission/Spain (C-189/11): This case discussed the distribution of VAT revenues among member states under the special travel agency scheme.
- Commission/Germany (C-380/16): It addressed how the special scheme simplifies VAT by considering the travel agency’s margin as the taxable base.
- First Choice Holidays (C-149/01): This case focused on the simplification of VAT deduction processes for travel agencies.
- Bogu Case (C-497/09): This case dealt with distinguishing between different types of services for VAT purposes.
- Star Coaches (C-220/11): It examined what constitutes a travel service under the VAT scheme.
- Generali Seguros (C-42/22): This case considered the principle of tax neutrality in the interpretation of VAT rules.
- Commission/Austria (C-787/19): This case addressed issues related to the interpretation of the VAT margin scheme.
Source
- Curia (in German – not yet available in English)
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